AI-Discovered Vulnerability Drains $38M Bitcoin from Coldcard Hardware Wallets
A build error in Coldcard firmware left private key generation vulnerable for over five years, resulting in an attack that drained approximately 594 BTC from hundreds of wallets.
The Vulnerability Exposed
Coinkite has disclosed a critical security flaw affecting its Coldcard hardware wallet line that compromised the private keys of hundreds of users. According to Coinkite, a build error dating back to March 2021 caused the device’s seed generation process to rely on a weak software-based random number generator instead of its intended hardware-based implementation. The vulnerability persisted undetected for over five years, leaving users’ funds at risk without their knowledge.
The root cause stemmed from a preprocessor guard that failed to properly validate a configuration setting, allowing the firmware to compile against an older MicroPython fallback function rather than Coinkite’s own hardware generator. Both code implementations carried identical function signatures, meaning the build process completed without raising errors or warnings to alert developers of the misconfiguration.
The Attack and Impact
On Friday, attackers exploited the vulnerability to drain approximately 594 BTC—valued at around $38 million—from roughly 500 Coldcard wallets within 25 minutes. The stolen funds were subsequently consolidated into a single address. Coinkite stated that it believes an attacker leveraged artificial intelligence to analyze previous versions of its open-source firmware to identify the flaw. Notably, Coinkite had conducted its own AI-powered code review weeks prior using one of the most advanced available models, yet that review failed to detect the vulnerability, highlighting how the same tools can serve both attackers and defenders.
Recovery and Product Impact
The vulnerability affects Coinkite’s current product lineup to varying degrees. The Mk3 model, now out of support, suffered the most severe impact, reducing the cryptographic search space of generated seeds to approximately 40 bits compared to the intended 128-bit security. Newer models—the Mk4, Q, and Mk5—benefit from additional entropy layers built into their secure hardware elements, bringing their effective search space to roughly 72 bits, though still below the security target.
Coinkite released emergency firmware updates (version 5.6.0 for Mk4 and Mk5, and 1.5.0Q for the Q model). However, updating firmware alone cannot repair seeds already generated on vulnerable versions. Users must create entirely new seeds using updated hardware, ideally combined with either a strong BIP-39 passphrase or additional entropy from methods such as dice rolls. Other Coinkite products—Tapsigner, Opendime, and Satscard—were unaffected.
This incident underscores how security vulnerabilities in foundational hardware wallet infrastructure pose systemic risks across the entire cryptocurrency market, affecting all digital asset holders.
Source: Coinkite, via Decrypt. Not financial advice.